Title: Is Celsius a Stellar Buying Option at a 69% Discount?
Celsius, previously soaring like a rocket, now finds itself on a different trajectory. Between 2018 and 2023, this energy drink company experienced a staggering 7,300% surge in shares. However, the spectacular climb peaked in March 2024, and since then, shares have plummeted a gut-wrenching 69%. But is this a golden opportunity for investors to buy low?
The exhausting descent
Celsius was once a dynamo of growth, with revenue skyrocketing 25-fold in just five years. Despite a dip in momentum this year, sales remained robust, growing 29% year-over-year through the first half of 2024.
However, the third quarter brought a jarring shift. Revenue crashed 31% year-over-year, largely due to PepsiCo, the powerhouse behind the soft drink and snack empire, encountering an inventory surplus. This inventory glut led to fewer orders, ultimately hurtling Celsius into a revenue decline.
Yet, there's hope. If supply chain chaos subsides and Pepsi's order book stabilizes, sales are poised to bounce back. This is what the optimists are banking on.
Bearing down on prospects
The revenue slump raises a legitimate concern for Celsius' long-term prospects. Critics argue that the company lacks an "economic moat," a term used to describe something durable and sustainable that shields a business from competition.
This market, teeming with competitors, doesn't grant many barriers to entry. New brands enter the fray regularly, and customers don't typically face high costs to switch between brands.
In its quest for growth, Celsius has pumped up its advertising budget, spending 12.1% of its revenue on advertisements in 2023. Celsius' deal with Pepsi might open doors to new markets but could also create competition within Pepsi's portfolio, including its esteemed line-up of energy drinks like Mountain Dew and Rockstar.
Celsius has lost ground in the sugar-free energy drink segment in recent months - a worrying sign for the company.
Priced out
Despite the significant drop in share price, the stock's price-to-earnings ratio sits at a hefty 42.6, representing a lofty 68% premium over the S&P 500. While Celsius' growth potential remains, its lack of substantial competitive advantages raises questions about its long-term resilience.
If Celsius can boost growth, reclaim market share, and crank up profit margins akin to its former glory, the argument for a bullish position becomes more compelling.
[1] Source: Yahoo Finance[2] Source: TipRanks[3] Source: Nasdaq[4] Source: Bloomberg[5] Source: Motley Fool
Enrichment Data: Celsius Holdings, Inc. (CELH) – Soft drink and energy drink company – undergoing transformation due to revenue slowdown, supply chain disruptions, and intense competition. However, strong brand loyalty, strategic growth initiatives, and a supportive partnership with PepsiCo Colombia Holdings S.A. A.S.G.N.B.C. position CELH for future recovery. Investor sentiment remains cautious as CELH grapples with current challenges.
Despite the current challenges, some investors might see the significant drop in Celsius' share price as an opportunity for investment. With a strategic partnership with PepsiCo, potential for market expansion, and strong brand loyalty, Celsius could eventually boost growth and reclaim lost market share, making a bullish position more compelling. However, the company's high price-to-earnings ratio and lack of substantial competitive advantages in a competitive market raise questions about its long-term resilience. Therefore, careful consideration and financial planning are essential when deciding to invest money in Celsius.
